All Things Fiduciary

I cannot see or hear this word without thinking of the properly pompous and utterly correct bowler-wearing British father of Jane and Michael Banks, of Mary Poppins fame. Do you remember that wonderfully silly song about his financial institution, the Dawes Tomes Mousley Grubbs FidelityFiduciary Bank?

Anyway, that’s what I think of when I hear the word ‘fiduciary’. In the strictest sense, Barron’s Dictionary of Insurance Terms defines it thus:

holding of property, or otherwise acting on behalf of another in trust. The fiduciary must exercise due care in safeguarding property left under personal care, custody, and control.

Further, a fiduciary is one who undertakes to act on behalf of another, giving rise to a special relationship, one of trust and confidence (and confidence, con-fidence, means ‘with faith’). An insurance agent often acts as an advisor, a role which entails a fiduciary duty.

It has been widely observed by money and finance gurus that a good life insurance agent is a woefully under-utilized financial services professional. At the same time, a surprising number of middle-income Americans want professional help with insurance and don’t know just who to talk to.

You know what I’m going to say, here. Ask your friends, ask your parents, ask people you trust. See who has an agent they like. Do some research. Find a good, go-to insurance person. Maybe two. I mean it. You will feel better – less exposed, more in control!

Back to the fiduciary thing. Florida court cases have established that fiduciary relationships can and do exist between insurance producers and their clients.

This means that the agents owe their clients care, honesty, integrity, full disclosure, good faith, loyalty, fairness and a commitment to act in the best interests of those clients.

What does mean? When talking about making recommendations about various insurance products, agents want to say ‘yes’ to the following questions:

Does/do the applicant/s understand the basic concepts of the product under consideration?

Does/do the applicant/s have sufficient assets to purchase the coverage and/or meet or exceed the financial objectives of the purchase?

Is the purchase the most suitable vehicle for meeting the financial objectives of the applicant/s (mostly relates to an annuity purchase)?

Is the sale in the best interests of the client and her or his family?